Helpful Advice for those who have Dependent Care Savings Accounts

Depending on what news you see today you may hear that the government might start opening up businesses at the end of the month or you may have heard some say that we will be isolated from our jobs until the fall.  No matter what, there will be a “new normal” that many companies will start to observe and this could have lasting effects on individuals who have dependent care savings accounts.

For some, daycare and commuting circumstances have changed which brings questions of how or if they are permitted to revoke or change their cafeteria plan elections midyear.  At this time, you may be eligible to make changes to your Flexible Spending Account (FSA) elections. These pre-tax accounts are administered for commuter benefits (Qualified Parking and/or Qualified Transportation) and/or dependent care expenses.

When it comes to Dependent Care Expenses and whether the disruptions caused by COVID-19 permit you to make changes to your existing elections it is always wise to seek sound advice.  Questions such as “My child’s daycare center closed due to COVID-19, and I am now working from home. Can I decrease my dependent care FSA election amount as I do not need daycare services right now?” The answer is yes, if your expenses have decreased because your child’s daycare center has closed, you can temporarily change or cancel your deferral.  Another common question at this time is, “My child’s school is closed due to COVID-19. I now need to pay someone to watch my child in my home. Can I increase my dependent care FSA election?”  That answer is also yes, you may increase your election if your child being unable to attend school results in an increase in daycare expenses.

In addition, when it comes to Commuter FSA, you are always able to make changes to your Qualified Parking and/or Qualified Transportation election amount. IRS regulations permit you to increase or decrease your monthly election amount at any time, if you find that the amount you are contributing exceeds your spending. This includes for the time spent working from home during government-issued stay-at-home orders.

At this time, the IRS still requires a qualified change in status (e.g., birth, marriage, divorce, job change impacting coverage) before you can change your deferral election to a healthcare FSA. Your plan will have a deadline, often a 30-day window, to make qualified changes, and you must provide evidence of the reason for the change when you make the request. The same mid-year status change rules generally apply to other benefit elections, such as coverage under a medical plan.

Employers should check their cafeteria plan document to confirm that midyear election changes are available under plan terms. If the cafeteria plan does not permit midyear changes, employers can consider amending the plan to provide eligible employees the opportunity to make changes to account for their changed circumstances. Once the employer confirms that these changes are permissible, the employer can communicate the employees’ options.

Having an attorney with the resources and knowledge to give you the best representation is vital to your interest and the interest of your family.  You also want to make sure they will exhaust all avenues and be willing to research, pursue and implement strategies to provide the best possible outcome.

Rob McAngus, Partner with Verner Brumley Parker, P.C., is Board Certified in family Law and his practice is devoted primarily to family law, including high conflict divorce, custody cases, and complex property issues. In addition to being selected on the Board of Directors for the Family Law Section of the Dallas Bar Association; he values your priorities as a parent and works with you to achieve the goals that will help transition your family to a new normal.  As both an adopted child and a member of a blended family, Rob can provide a unique perspective in the practice of family law.

Rob has been recognized in Super Lawyers as a Rising Star in 2016 through 2020, and recently The National Advocates recognized Rob as one of the Top 40 Under 40.  He can be reached by calling 214.526.5234 or email at rmcangus@vernerbrumley.com.  Mr. McAngus received his bachelor’s degree cum laude and master’s degree from Baylor University and graduated cum laude from the Dedman School of Law at Southern Methodist University.